[Congressional Record Volume 142, Number 48 (Tuesday, April 16, 1996)]
[Extensions of Remarks]
[Page E531]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




     INTRODUCTION OF THE DISTRICT OF COLUMBIA ECONOMIC RECOVERY ACT

                                 ______


                       HON. ELEANOR HOLMES NORTON

                      of the district of columbia

                    in the house of representatives

                         Monday, April 15, 1996

  Ms. NORTON. Mr. Speaker, today I am introducing the District of 
Columbia Economic Recovery Act [DCERA], a bill to provide a Federal tax 
reduction to the residents of the District of Columbia. The bill comes 
at a time when the city's financial viability is in peril. The 
Constitution obligates the Congress to maintain the Capital of the 
United States. The DCERA will allow Congress to do so without direct 
aid, by encouraging middle income residents to remain and to move to 
the District.
  Last February, the Washington Post reported that the District has 
already lost more residents in the 1990's than in the entire decade of 
the 1980's. The District's tax base is declining so rapidly that it is 
doubtful that it will gain the ability to support itself, 
notwithstanding even the most dramatic reduction in the size of its 
government. In 1993, for example, only 9,838 D.C. residents or 3.4 
percent of the tax filers were solidly middle income in the $75,000 to 
$100,000 range, while 65 percent had incomes of $30,000 or less. 
Ominously, 11.5 percent of D.C. tax filers had an income between 
$50,000 and $100,000, compared with almost 20 percent nationally.
  The bill seeks to accomplish the goal of replenishing middle income 
residents and families through a Federal tax discount. The tax is 
progressive because it has large initial exemptions ($15,000 for single 
filers, $25,000 for single heads of household, and $30,000 for married 
joint filers); the mortgage interest deduction and the charitable 
giving deductions are retained; and a uniform tax rate of 15 percent is 
applied in a progressive fashion up the income scale. Only bona fide 
District residents can qualify for this special rate and only on their 
D.C. sourced income. The bill defines a bona fide resident as one who 
has maintained his or her place of abode in the District, been 
physically present in such a place of abode for at least 183 days of 
the taxable year, and has paid District of Columbia income taxes. 
Naturally, District residents who work in the metropolitan region will 
also benefit from the tax deduction. The metropolitan region is defined 
by the Federal Government's ``Consolidated Metropolitan Statistical 
Area.''
  The bill exempts capital gains, so long as they are District 
investments by bona fide District residents. This provision is meant to 
stimulate investment in D.C. businesses and other economic development. 
In come from Social Security and from the qualified pension plans of 
bona fide D.C. residents are considered D.C. sourced and thus eligible 
for the tax reduction. Investment income on activity within the 
District will also qualify for the special tax rate. In short, income 
from outside the District or the region will not get the benefit of the 
DCERA. The provisions of the bill restricting the tax reduction to D.C. 
residents on their D.C. sourced income are designed to prevent 
speculators and wealthy people from taking advantage of the bill or 
turning the District into a tax haven. A freeze on property taxes is an 
additional safeguard that I am seeking from the city council.
  Some Members will question why the District should receive a Federal 
tax reduction that is not available to other jurisdictions. This unique 
bill is being considered only because of the unique responsibility of 
the Congress for the Capital of the United States and because a grave 
financial crisis threatens the District's viability as a city. The 
District has no State to help support it, and therefore lacks any 
additional sources for a long-term revenue stream or other necessary 
ongoing relief. The District is the only city without a State to 
recycle revenue from wealthier areas; the only city that pays for 
State, county, and municipal functions; and the only city prevented by 
Congress from taxing commuters who use city services. As a result, the 
District is a financial orphan without a State to bear State costs, 
such as Medicaid and prisons, and without access to the other aid that 
States regularly give to their troubled big cities. Because none of the 
usual remedies is available to the District, a tax cutting approach to 
stem the hemorrhage of taxpayers holds virtually the only promise.
  As this House is well aware, the District is in a state of fiscal 
insolvency and cannot borrow from Wall Street, but only from the U.S. 
Treasury. A Control Board was appointed nearly a year ago and is 
working to downsize the Government (10,000 jobs by 1999--5,600 jobs 
already eliminated), control spending, and return the District to 
financial solvency. When New York, Philadelphia, and Cleveland became 
insolvent, State aid and State takeover of city functions were critical 
to the recovery of those cities. That possibility does not exist 
presently for the District, the only city in the United States without 
a State. As a result, there is little prospect that the city can become 
self-supporting without extraordinary measures.
  In the absence of state aid, this Federal tax reduction is the only 
remedy that has the potential in this Congress to allow the District to 
recover from its insolvency. I believe that this approach could also 
serve as a model for States which want to encourage taxpayers to remain 
in large cities, by reducing State income taxes for city residents; 
but, of course, only Congress can provide such a remedy for the 
District. The value of a tax reduction is in the encouragement it gives 
to residents to remain in a city with many problems, paying high city 
taxes, maintaining the schools and other services, and otherwise 
halting decline because of increased taxpayer presence.
  The District is the only jurisdiction that flies the American flag 
where residents pay Federal income taxes, but do not have full 
representation in the House and have no representation in the Senate. 
The four territories pay no Federal income tax at all, while the 
District is second per capita in the payment of Federal income taxes. 
This bill will not give the District full equity in this regard--D.C. 
residents would continue to pay Federal taxes without full 
congressional representation and full self-government. The District 
seeks only sufficient tax relief to help sustain itself through income 
from its own residents--as most jurisdictions do--in the absence of 
other viable alternatives.
  I believe that the District of Columbia Economic Recovery Act fits 
the tax cutting mood of the country and of both parties and the 
administration. I ask the Members of this House to join me in our 
efforts to save the District of Columbia through this bill.

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